Harley Davidson has rejected offers of assistance from Japanese motorcycle makers. This offer was made at the urging of MITI following the recommendation of the imposition of tariffs by the US International Trade Commission (See US ITC Recommends Stiff Tariffs on Imported Motorcycles, THE JAPAN LAWLETTER, (Trade Law Section), March, 1983; Harley Davidson Claims Dumping, THE JAPAN LAWLETTER, (Trade Law Section), September, 1982;). President Reagan then followed the recommendations made by the ITC to impose the tariffs in order to protect Harley-Davidson, the sole US motorcycle maker. Based on Article 201 of the 1974 Trade Act, tariffs on imported motorcycles with engines of 700 cc or more will be raised from 4.4% to 49.4% the first year, 39.4% in the second year, 24.4% the 3rd year, 19.4% the fourth year and 14.4% in the fifth year before returning to 4.4%. The surcharges would not apply to 6000 bikes imported from Japan, 5000 from W. Germany, and 4000 from other countries. The Japanese quota will be increased by 1000 per year. Of the 247000 large bike sales in the US in 1981 41000 were made by Harley, 50000 by Japanese owned factories in the US, 20000 imported from Japan and most of the remainder from BMW of W. Germany. The chairman of Harley said he felt confident that within 5 years his firm would be competitive. Harley manufactured only 32000 bikes in 1982. Japanese government officials were shocked at President Reagan's "extremely unusual and highly protectionist step". The were also disappointed that the offer of assistance to Harley from the Japanese makers had not been appreciated by the Americans. The government said it would seek compensatory measures from the US government under Article 9 of GATT, whereby if one nation imposes restraints on another country's goods, the other country may seek compensation in lower tariffs, etc on other goods or raise their own tariffs of goods of the country taking the original action. Minister of International Trade and Industry stated "Japan has, of course, the right to retaliate against the US by delivering a similar blow to a certain US item...Emotionally, I feel like hitting back. But I am now trying to be patient and not to raise a first." The Japanese embassy in the US was ordered to lodge a protest and to ask the US to hold discussions over the matter in Geneva based on GATT. The chairman of Honda Motors called the new tariff "stupid." The effects of the tariff on Japanese makers will vary. Although it is expected that the 49% tariff will raise retail prices by around 24%, the effect on prices this year will be under 10% as the Japanese makers already have over 1 year's worth of inventory on hand in the US. Although Kawasaki and Honda both have plants in the US, the products of which will not be subject to the tariffs, as Suzuki and Yamaha do not have US production. Harley, as part of its improvement package, is rumoured to be designing a new model based on a tieup with Porsche of W. Germany. In 1982 Honda exported 150,000 bikes (700 cc and over) and Yamaha 50,000. Honda plans to increase its production of large bikes at its US facility, but figures that 60,000 units is the best it can do. Kawasaki plans to financially rebuild its US subsidiary which has about 10 billion yen in accumulated deficits. Kawasaki will also stop producing 400 and 500 cc bikes in the US and instead export them from Japan. Then the company will increase its production workers in the US by more than 100 workers, concentrate all production on large scale bikes, increasing the US production of large bikes from 50,000 per year to 70,000. In 1982 Kawasaki exported 120,000 bikes to the US. Kawasaki presently has 350 workers in the US. The company plans to invest 1 billion yen in the US under the plan. At present Honda has a 37% share of the US market, Yamaha 25%, Suzuki 16% and Kawasaki 14%, completely controlling the market.

THE JAPAN LAWLETTER JULY-AUGUST 1983 Editor: Roderick Seeman